The Consequences of Not Paying Property Taxes

Written by Jane Meggitt; Updated December 02, 2018

Municipalities depend on property taxes to fund a range of services, from road maintenance, police and fire departments, libraries, parks and recreation and a host of others. Property taxes also fund public education. That’s one reason why the consequences of failing to pay property taxes are often severe. If too many homeowners or businesses fail to pay such taxes on time, the quality of life for the community suffers.

Tip

Consequences for not paying your property taxes include increased monies owed through fines and fees. You could ultimately lose your home.

Avoid Tax Liens and Tax Sales

In the worst-case scenario, not paying your property taxes means you will lose your house. Depending on your state and jurisdiction, the property is either sold at public auction or the tax lien is sold and the buyer forecloses on the dwelling if you don't pay back the back taxes, fees and interest. Property tax liens are claims against the property for the amount of taxes due. Such liens take priority over any other type of lien, and that includes your mortgage. For that reason, a lender will generally pay the back property taxes so the home doesn’t face a tax sale. The mortgage company will then attempt to have the borrower pay the amount due. If the borrower isn’t able to comply, the lender starts foreclosure proceedings.

Apply for Home Redemption

In many states, the delinquent owner can redeem the home even after a tax sale is held by reimbursing the buyer for what they paid, with interest, within a certain timeframe. In most states, the redemption period is a year, but it is important to find out your state’s laws. In California, once your house is sold at a tax sale, you are out of luck.

San Francisco Delinquent Property Taxes

California is more generous than other states when it comes to property tax delinquencies. It can take five years of nonpayment before the property is sold at auction. In San Francisco, those who do not pay their property taxes on time are subject to a 10 percent penalty on the unpaid portion. Should they fail to pay their taxes by the due date a second time, they are also charged an administrative fee. If the tax bill is not paid by the June 30 end of the fiscal year, the property is in tax default. From that point, they are placed on the city’s redemption tax roll, where they accrue a 1.5 percent penalty, the equivalent of 18 percent annually, until the overdue balance is paid. If the property owner pays the back taxes at this point, they are charged a redemption fee.

Get an Installment Plan

San Francisco allows taxpayers to request an installment plan to pay overdue taxes. This installment plan permits payment over a five-year period, as long as the property owner has paid a minimum of 20 percent of the balance due, along with a processing fee. The plan remains in good standing as long as the property owner pays at least 20 percent of the back taxes due each year, along with interest, by an April 10 deadline. The owner must stay current with their regular property tax bill.

Pay Delinquent Property Taxes

Should a property remain in default for five years, the tax collector has the right to sell it. Such properties are placed on the Delinquent Property Tax Statement, and the tax collector may either sell it at public auction or the property is “otherwise conveyed to new ownership.” Once a property is placed on the delinquent statement, the only way for the owner to redeem it prior to sale is by paying all of the back taxes, along with applicable fees and penalties. Once the house is sold, the delinquent former owner cannot get it back.